REDWOOD CITY, Calif.--(BUSINESS WIRE)--
Shutterfly, Inc. (NASDAQ:SFLY), the leading manufacturer and digital
retailer of high-quality personalized products and services offered
through a family of lifestyle brands, today announced financial results
for the first quarter ended March 31, 2015.

"Shutterfly delivered a strong start to 2015, with key financial
metrics ahead of our expectations and strong customer activity across
our consumer brands and in our emerging enterprise business," said
Jeffrey Housenbold, President and CEO of Shutterfly."Our teams
are executing well and making good progress on our strategic imperatives
to deliver a combination of innovation and operating scale that we
believe will further enhance our competitive leadership and drive near-
and long-term shareholder value."

GAAP net loss was ($45.1) million, compared to ($34.2) million in the
first quarter of 2014.

GAAP net loss per diluted share was ($1.19), compared to ($0.89) in
the first quarter of 2014.

Non-GAAP net loss per diluted share was ($1.11), compared to ($0.82)
in the first quarter of 2014.

Adjusted EBITDA was a ($0.9) million loss, compared to $0.2 million in
income in the first quarter of 2014.

At March 31, 2015, cash and investments totaled $324.3 million.

(1) Effective in the fourth quarter of 2014, the
Company defined two reportable segments based on factors such as how
management manages the operations and how the chief operating decision
maker views results.The Company's two reportable segments are
Consumer and Enterprise. Refer to the Segment Disclosure table at the
back of the release for segment level disclosures.

Average order value without the impact of the Groovebook acquisition
was $32.40, a decrease of 4% year-over-year.

Business Outlook

Second Quarter 2015:

Net revenues to range from $175.5 million to $179.5 million, a
year-over-year increase of 10.3% to 12.8%.

GAAP gross profit margin to range from 43.7% to 44.4% of net revenues.

Non-GAAP gross profit margin to range from 45.4% to 46.1% of net
revenues.

GAAP operating loss to range from ($44.5) million to ($39.9) million.

Non-GAAP operating loss to range from ($18.4) million to ($15.4)
million.

GAAP effective tax rate to range from 10.0% to 16.0%.

GAAP net loss per share to range from ($1.10) to ($1.07).

Weighted average diluted shares of approximately 37.9 million.

Adjusted EBITDA to range from $5.5 million to $7.5 million.

Full Year 2015:

Net revenues to range from $1.045 billion to $1.060 billion, a
year-over-year increase of 13.4% to 15.0%.

GAAP gross profit margin to range from 49.0% to 50.5% of net revenues.

Non-GAAP gross profit margin to range from 50.1% to 51.6% of net
revenues.

GAAP operating income/(loss) to range from ($0.4) million to $10.8
million.

Non-GAAP operating income to range from $96.6 million to $106.9
million.

GAAP effective tax rate to range from 10.0% to 16.0%.

GAAP net loss per share to range from ($0.46) to ($0.23).

Weighted average diluted shares of approximately 37.7 million.

Adjusted EBITDA to range from $185.0 million to $192.9 million, or
17.7% to 18.2% of net revenues.

Capital expenditures to range from 8.6% to 9.2% of net revenues.

Notes to the First Quarter 2015 Financial Results and Business Outlook

Adjusted EBITDA is a non-GAAP financial measure that the Company defines
as earnings before interest, taxes, depreciation, amortization and
stock-based compensation.

Free cash flow is a non-GAAP financial measure that the Company defines
as adjusted EBITDA less purchases of property, plant, and equipment and
capitalization of software development costs.

Non-GAAP earnings per share is defined as non-GAAP net income (loss),
which excludes interest expense related to the Company's issuance of
0.25% convertible senior notes in May 2013, divided by diluted non-GAAP
shares outstanding, which is GAAP diluted weighted average shares
outstanding less any shares issuable under the Company's convertible
senior notes.

Consumer segment includes net revenues from stationery and greeting
cards, photo books, calendars and photo-based merchandise, photo prints,
and the related shipping revenues and rental revenue. Consumer also
includes net revenues from advertising and sponsorship programs.

Average Order Value (AOV) is defined as total net revenues (excluding
Enterprise) divided by total orders.

The foregoing financial guidance replaces any of the Company's
previously issued financial guidance which should no longer be relied
upon.

First Quarter 2015 Conference Call

Management will review the first quarter 2015 financial results and its
expectations for the second quarter and full year 2015 on a conference
call on Wednesday, April 29, 2015 at 2:00 p.m. Pacific Time (5:00 p.m.
Eastern Time). To listen to the call and view the accompanying slides,
please visit http://www.shutterflyinc.com.
In the Investor Relations area, click on the link provided for the
webcast, or dial 970-315-0490. The webcast, as well as a podcast, will
be archived and available at http://www.shutterflyinc.com.
A replay of the conference call will be available through Wednesday, May
13, 2015. To hear the replay, please dial 855-859-2056 or 404-537-3406,
replay passcode 26836575.

Non-GAAP Financial Information

This press release contains non-GAAP financial measures. Tables are
provided at the end of this press release that reconcile the non-GAAP
financial measures that the Company uses to the most directly comparable
financial measures prepared in accordance with Generally Accepted
Accounting Principles (GAAP). These non-GAAP financial measures include
non-GAAP gross profit margin, non-GAAP operating income (loss) and
operating margin, adjusted EBITDA, free cash flow, and non-GAAP net
income (loss) per share. The method the Company uses to produce non-GAAP
financial measures is not computed according to GAAP and may differ from
methods used by other companies.

To supplement the Company's consolidated financial statements presented
on a GAAP basis, we believe that these non-GAAP measures provide useful
information about the Company's core operating results and thus are
appropriate to enhance the overall understanding of the Company's past
financial performance and its prospects for the future. These
adjustments to the Company's GAAP results are made with the intent of
providing both management and investors a more complete understanding of
the Company's underlying operational results and trends and performance.
Management uses these non-GAAP measures to evaluate the Company's
financial results, develop budgets, manage expenditures, and determine
employee compensation. The presentation of additional information is not
meant to be considered in isolation or as a substitute for or superior
to gross margins, operating income (loss), net income (loss) or net
income (loss) per share determined in accordance with GAAP. For more
information, please see Shutterfly's SEC Filings, including the most
recent Form 10-K and Form 10-Q, which are available on the Securities
and Exchange Commission's Web site at www.sec.gov.

Notice Regarding Forward-Looking Statements

This media release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, that
involve risks and uncertainties. These forward-looking statements
include statements regarding the Company's growth and financial
expectations for the second quarter and full year 2015 set forth under
the caption "Business Outlook," and statements about historical results
that may suggest trends for our business. The Company's actual results
may differ materially from those anticipated in these forward-looking
statements. Factors that might contribute to such differences include,
among others, economic downturns and the general state of the economy;
changes in consumer discretionary spending as a result of the
macroeconomic environment; the loss of sales partners for our products;
our ability to expand our customer base, increase sales to existing
customers and meet production requirements; our ability to successfully
integrate acquired businesses and assets; our ability to retain and hire
necessary employees, including seasonal personnel, and appropriately
staff our operations; the impact of seasonality on our business; our
ability to develop innovative, new products and services on a timely and
cost-effective basis; consumer acceptance of our products and services;
our ability to develop additional adjacent lines of business; unforeseen
changes in expense levels; and competition and the pricing strategies of
our competitors, which could lead to pricing pressure. For more
information regarding the risks and uncertainties that could cause
actual results to differ materially from those expressed or implied in
these forward-looking statements, as well as risks relating to our
business in general, we refer you to the "Risk Factors" section of the
Company's most recent Form 10-K and Form 10-Q, and the Company's other
filings, which are available on the Securities and Exchange Commission's
Web site at www.sec.gov.
These forward-looking statements are based on current expectations and
the Company assumes no obligation to update this information.

About Shutterfly, Inc.

Shutterfly, Inc. is the leading manufacturer and digital retailer of
high-quality personalized products and services offered through a family
of lifestyle brands. Founded in 1999, the Shutterfly, Inc. family of
brands includes Shutterfly,
where your photos come to life in photo books, cards and gifts; Tiny
Prints, premium cards and stationery for all life's occasions; Wedding
Paper Divas, wedding invitations and stationery for every step of
the planning process; MyPublisher,
one of the pioneers in the photo book industry and creator of
easy-to-use photo book-making software; ThisLife,
a private, cloud-based solution that makes it easy for consumers to
find, share and enjoy their photos and videos, all in one place; and BorrowLenses,
the premier online marketplace for photographic and video equipment
rentals. For more information about Shutterfly, Inc. (NASDAQ:SFLY),
visit www.shutterflyinc.com.

Adjustments to reconcile net loss to net cash used in operating
activities:

Depreciation and amortization

19,909

14,222

Amortization of intangible assets

7,684

8,583

Amortization of debt discount and transaction costs

3,340

3,158

Stock-based compensation, net of forfeitures

17,760

15,992

Loss on disposal of property and equipment and rental assets

463

55

Deferred income taxes

1,539

1,309

Tax benefit from stock-based compensation

17,891

16,281

Excess tax benefits from stock-based compensation

(18,139

)

(16,328

)

Changes in operating assets and liabilities:

Accounts receivable, net

10,928

7,106

Inventories

1,012

1,117

Prepaid expenses and other current assets

(28,803

)

(23,345

)

Other assets

311

(5,484

)

Accounts payable

(18,015

)

(19,982

)

Accrued and other liabilities

(78,669

)

(68,226

)

Deferred revenue

382

2,527

Other non-current liabilities

(221

)

(244

)

Net cash used in operating activities

(107,731

)

(97,473

)

Cash flows from investing activities:

Purchases of property and equipment

(11,059

)

(10,285

)

Capitalization of software and website development costs

(3,798

)

(4,326

)

Purchases of investments

(3,150

)

(54,850

)

Maturities and sales of investments

11,700

-

Proceeds from sale of equipment and rental assets

13

128

Net cash used in investing activities

(6,294

)

(69,333

)

Cash flows from financing activities:

Proceeds from issuance of common stock upon exercise of stock options

1,168

1,358

Repurchases of common stock

(45,195

)

(34,610

)

Excess tax benefits from stock-based compensation

18,139

16,328

Principal payments of capital lease and financing obligations

(2,466

)

(436

)

Net cash used in financing activities

(28,354

)

(17,360

)

Net decrease in cash and cash equivalents

(142,379

)

(184,166

)

Cash and cash equivalents, beginning of period

380,543

499,084

Cash and cash equivalents, end of period

$

238,164

$

314,918

Supplemental schedule of non-cash activities

Net increase in accrued purchases of property and equipment

$

2,919

$

6,134

Net increase in accrued capitalized software and website
development costs

274

786

Increase in estimated fair market value of building under
build-to-suit leases

8,459

7,998

Property and equipment acquired under capital leases

9,803

-

Amount due from adjustment of net working capital from acquired
business

-

110

Shutterfly, Inc.

Consumer Metrics Disclosure

Three Months Ended

March 31,

2015

2014

Consumer Metrics

Customers

3,186,588

2,557,245

year-over-year growth

25%

Orders

5,156,375

3,869,201

year-over-year growth

33%

Average order value*

$28.86

$33.76

year-over-year growth

-15%

* Average order value excludes Enterprise revenue.

Shutterfly, Inc.

Segment Disclosure

(In thousands)

(Unaudited)

Three Months Ended

Mar. 31, 2015

Mar. 31, 2014

Consumer

Revenues

$

148,788

$

130,621

Cost of revenues

80,778

66,408

Gross Margin

$

68,010

$

64,213

45.7

%

49.2

%

Enterprise

Revenues

$

11,190

$

6,478

Cost of revenues

9,888

6,110

Gross Margin

$

1,302

$

368

11.6

%

5.7

%

Corporate (1)

Revenues

$

-

$

-

Cost of revenues

4,041

3,825

Gross Margin

$

(4,041

)

$

(3,825

)

Consolidated

Revenues

$

159,978

$

137,099

Cost of revenues

94,707

76,343

Gross Margin

$

65,271

$

60,756

40.8

%

44.3

%

Non-GAAP Gross Margin

43.3

%

47.1

%

(1) Corporate category includes activities that are not directly
attributable or allocable to a specific segment. This category
consists of stock-based compensation and amortization of
intangible assets.

Reflects estimated adjustments for stock-based compensation
expense of approximately $1.0 million and amortization of
purchased intangible assets of approximately $2.0 million.

[b]

Reflects estimated adjustment for stock-based compensation expense
of approximately $17.8 million to $18.5 million, and amortization
of purchased intangible assets of approximately $6.7 million to
$7.5 million

[c]

Reflects estimated adjustments for stock-based compensation
expense of approximately $4.2 million and amortization of
purchased intangible assets of approximately $7.6 million.

[d]

Reflects estimated adjustments for stock-based compensation
expense of approximately $69.5 million to $69.1 million and
amortization of purchased intangible assets of approximately $27.5
million$27.0 million.

[e]

Reflects estimated adjustments for interest expense of approximately
$3.0 million to $3.2 million, net of tax.

[f]

Reflects estimated adjustments for interest expense of approximately
$12.1 million to $13.0 million, net of tax.

[g]

Reflects a range of estimated adjustments for the following
restructuring events:

From

To

Platform consolidation

$ 5.0

$ 6.0

Elmsford facility and Treat closure

5.0

6.0

Depreciation and amortization [1]

1.3

1.3

$ 11.3

$ 13.3

[1] Includes accelerated depreciation of capitalized website costs
and amortization of intangible assets.